The growth of Internet use has given consumers more power and enlarged and diversified the risks that corporations are facing, said three of Japan's major corporation executives at the IT Governance 2002 Forum, organized by JUAS (Japan User Association of Information System), on Tuesday. Corporations must bear this in mind in their risk management planning if they are not to see their companies fold, they urged.
The role of chief information officer (CIO) has changed since 1995 when the Internet started being used in daily life, Hideaki Takahashi, vice president and chief executive officer of Fuji Xerox Co. Ltd said at the forum Tuesday. "(The CIO) needs to be more of a chief innovation officer, someone who can take a broad view of the company in the same way as the company president does."
IT is now involved in every area of a company, so a CIO should not be a technology-oriented person but someone who can convince the company's top management of what is needed, said Yoshikazu Arai, executive managing director of Kirin Brewery Co. Ltd.
This is especially important when it comes to risk management, said Masakazu Namera, president and chief executive officer of Nippon Ham System Engineering Co. Ltd. (NSE). Unlike IT, which can be seen as part of a company's restructuring plans or management strategies, risk management does not bring any profit to a company and in fact is costly.
Therefore, making decisions on risk management is in the hands of top management and CIOs need to be in a position to convince them that it is needed, he said.
There was a company scandal in Japan last year, which forced a major meat processing company to fold, Namera said. The Bovine Spongiform Encephalopathy (BSE) outbreak in cattle caused panic among consumers and severely affected the meat industry. This led one major meat processing company to fake documents detailing where its meat products had come from. When it was found out, the resulting damage to its brand name forced the company out of business.
It is very difficult to build a system to trace where meat products have come from, Namera said. "But since this incident, the government is encouraging companies to develop a traceability system. This is one example of the challenges we are facing. Companies have to respond quickly to changes in social systems in order to survive."
Traceability and other kinds of risk management can be applied to every industry, Takahashi said. Consumer electric makers, for example, now have full responsibility over where their home appliances end up after they are sold to consumers, since a law on recycling home appliances came into force last year in Japan.
If companies neglect risk management, they may find their brand image under attack on the Internet, Takahashi said. Fuji Xerox employs a research company to check bulletin boards for criticism of the company and its products, he said.
One of the bulletin boards is a cult site called "Channel 2", which gets 500 million to 2 billion hits a day. The site covers hundreds of topics, including product reviews and company criticism and has a large impact on Japanese society, said Hiroshi Nakajima, a professor at Kokusai University and a moderator of the discussion at JUAS Forum.
"Corporations must recognize that we are in the Internet era where individuals control mass media to influence corporations, instead of the corporations using mass media to influence consumers," Namera said.
